U.S. read­ies tax on Chi­nese foil

Alu­minum sub­si­dies cited; step comes as trade ten­sions rise.

The United States has de­cided to levy an im­port tax of up to 81 per­cent on ship­ments of alu­minum foil from China, pe­nal­iz­ing the coun­try for what U.S. trade of­fi­cials say are un­fair sub­si­dies of its prod­ucts.

The de­ci­sion could add to mount­ing ten­sions be­tween the world’s two big­gest economies over trade as Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion moves to­ward a tougher stance on Chi­nese trade vi­o­la­tions.

A pre­lim­i­nary de­ci­sion is­sued Tues­day evening by the Com­merce Depart­ment found that the prod­ucts were re­ceiv­ing fi­nan­cial as­sis­tance from the Chi­nese gov­ern­ment. It specif­i­cally levied so­called coun­ter­vail­ing du­ties on four Chi­nese com­pa­nies, rang­ing from an 81 per­cent im­port tax on ex­ports from one com­pany to a 17 per­cent tax on an­other. Chi­nese com­pa­nies not specif­i­cally named face a duty of 22 per­cent on prod­ucts they ex­port to the U.S. mar­ket.

The rul­ing still awaits a fi­nal de­ci­sion from the depart­ment on Oct. 23 as well as a rul­ing by the In­ter­na­tional Trade Com­mis­sion. In the mean­time, the Com­merce Depart­ment will in­struct bor­der of­fi­cials to be­gin col­lect­ing the du­ties on the prod­ucts. The mea­sure will cover the kind of alu­minum foil com­monly used in kitchens, as well as in prod­uct pack­ag­ing, cook­ware and au­to­mo­biles.

The Alu­minum As­so­ci­a­tion, a trade group, said it was “very pleased” with the find­ing. “This is an im­por­tant step to be­gin restor­ing a level play­ing field for U.S. alu­minum foil pro­duc­tion, an in­dus­try that sup­ports more than 20,000 di­rect, in­di­rect, and in­duced Amer­i­can jobs, and ac­counts for $6.8 bil­lion in eco­nomic ac­tiv­ity,” said Hedi Brock, the group’s pres­i­dent.

The de­ci­sion is a rou­tine one, as the United States fre­quently sets du­ties on im­ports it be­lieves are un­fairly sub­si­dized. But it takes on more im­por­tance now that the Trump ad­min­is­tra­tion is ratch­et­ing up pres­sure on Chi­nese trade prac­tices, said

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Chad Bown, a se­nior fel­low at the Peter­son In­sti­tute.

“This would hap­pen un­der any ad­min­is­tra­tion. I think what’s in­ter­est­ing and use­ful about it though is that it does tie into this big­ger alu­minum and over­ca­pac­ity is­sue,” said Bown.

The Trump ad­min­is­tra­tion has fre­quently crit­i­cized China for flood­ing global mar­kets with ul­tra­cheap prod­ucts and putting com­pet­ing in­dus­tries in the United States out of busi­ness. Many of China’s in­dus­tries are owned or sub­si­dized by the state, which means they can con­tinue to pump out prod­ucts even when it is not prof­itable to do so, economists say.

Trump spoke of­ten on the cam­paign trail about crack­ing down on China’s trade abuses. But in the ini­tial months of his pres­i­dency, he ap­peared to be will­ing to cut the Chi­nese more slack on trade in ex­change for help with diplo­macy goals, such as pres­sur­ing North Korea to aban­don its nu­clear weapons pro­gram.

“I ex­plained to the Pres­i­dent of China that a trade deal with the U.S. will be far bet­ter for them if they solve the North Korean prob­lem!” Trump tweeted in April.

In more re­cent months, how­ever, the pres­i­dent ap­peared to aban­don that strat­egy, while si­mul­ta­ne­ously ratch­et­ing up trade pres­sure on China. The Chi­nese “do NOTH­ING for us with North Korea, just talk,” Trump tweeted July 30.

The Trump ad­min­is­tra­tion has separately been in­ves­ti­gat­ing the risk that im­ports of alu­minum and steel pose to the coun­try’s na­tional se­cu­rity. The in­ves­ti­ga­tion is be­ing car­ried out un­der a sec­tion of the 1962 trade law known as 232. If the Com­merce Depart­ment finds that im­ports are threat­en­ing Amer­ica’s in­dus­trial base, that le­gal pro­vi­sion would al­low the ad­min­is­tra­tion to im­pose tar­iffs or other re­stric­tions.

The pres­i­dent and Com­merce Sec­re­tary Wil­bur Ross had said that the first of those Sec­tion 232 in­ves­ti­ga­tions, into steel im­ports, would be con­cluded by the end of June. But the de­ci­sion has been de­layed, in part be­cause of push-back from for­eign al­lies and steel-us­ing in­dus­tries that might suf­fer.

Mean­while, the United States has tried to use the threat of tar­iffs to press the Chi­nese to re­duce over­ca­pac­ity in steel and other in­dus­tries. But a meet­ing be­tween U.S. and Chi­nese trade of­fi­cials in Wash­ing­ton broke

down in mid-July af­ter the Chi­nese re­fused to com­mit to an am­bi­tious re­quest to cut its steel pro­duc­tion, ac­cord­ing to peo­ple who at­tended the meet­ing.

Mean­while, the United States is also con­sid­er­ing a sep­a­rate trade mea­sure against China un­der Sec­tion 301 of the 1974 trade law. This mea­sure, which could come as soon as next week, would pe­nal­ize the Chi­nese for theft of Amer­i­can in­tel­lec­tual prop­erty.

The United States main­tains a vast patch­work of trade re­stric­tions against spe­cific Chi­nese prod­ucts through anti-dump­ing and coun­ter­vail­ing du­ties set by the Depart­ment of Com­merce — like the alu­minum foil de­ci­sion on Tues­day. But mea­sures ini­ti­ated un­der Sec­tion 232 or Sec­tion 301 of the United States trade laws would ap­ply to a much broader col­lec­tion of prod­ucts.

Yet the moves come at a time when China ex­perts say Bei­jing may be un­likely to bend to ex­ter­nal pres­sure. The coun­try is quickly ap­proach­ing a po­lit­i­cal tran­si­tion this fall in which suc­ces­sors for five of its top seven lead­er­ship po­si­tions may be named, and lead­ers could take a tough stance on trade to en­sure they are not sub­ject to crit­i­cism at a po­lit­i­cally vul­ner­a­ble time.

“If the ne­go­ti­a­tions go quickly enough, we’ll be in­ves­ti­gat­ing the Chi­nese in the mid­dle of their tran­si­tion, the so-called Party Congress, and that might put the Chi­nese in a po­lit­i­cal bind,” Scott Kennedy, deputy di­rec­tor of the Free­man Chair in China Stud­ies at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies, said of the 301 in­ves­ti­ga­tion. “If they can’t reach a deal and the United States de­cides to move to­ward penal­ties, China would likely re­spond with re­tal­ia­tory penal­ties, as well as bring a case to the [World Trade Or­ga­ni­za­tion].”

AP

A worker ar­ranges rolls of alu­minum at a fac­tory in China’s An­hui prov­ince. The United States plans to levy an im­port tax of up to 81 per­cent on alu­minum foil from China.